Property prices 'correcting', but no cause for alarm
When the residential property market is correcting - as is currently happening, especially in the Western Cape - pricing a home correctly becomes all the more important.
This is according to Crispin Inglis, co-founder of online estate agency PropertyFox.
"When the market is correcting, it takes a bit of time for sellers to realise that, although a house down the road might have sold for more in the past, that is not necessarily in line with the market anymore," explains Inglis.
In general, across the country, the property market appears to be stagnant and the annual growth in house prices is slowing. If one takes inflation into account, real house price growth is declining actually.
Currently, residential property stays on the market for an average of four months before it is sold - up from the previous average of three months.
According to Inglis, the Western Cape residential property market had an "interesting year", having to face challenges which included the impact of the drought.
Live values
"The semigration trend, of people from other provinces buying property in the Western Cape, is one of the variables," he said. "[That], along with the fact that the Western Cape came out of a property boom, has stabilised now, in our view."
Inglis says the Western Cape property market is currently going into a "correcting phase", which has seen some homes listed for much higher than the price they sold at ultimately.
Agents often look at historical sales to value a property, he says. That makes it difficult when the market changes.
"Therefore, we use technology to include live data from the markets - we marry historical and live data together.
"For instance, if you put a property on the market for R3m, our valuation platform allows you to react to supply and demand in the market in real time. You can adjust much quicker if you see that you priced your property out of the market," he says.
He says sellers often want or need to sell for more than the market is valuing their property at a given time.
"If we tried at their higher price, then at least the seller is equipped to see the market reaction and can then decide to take it off the market and wait for the next upswing," says Inglis.
"It is about being informed. There is a big demand for accurate information.
"We support their expectations already from the beginning by showing how long a property is likely to be on market at a given price. Then, if they have about three months to sell, they can take a bit of a chance with the price."
Understanding the market's climate at a given time is crucial, he says. In July, for instance, properties listed on PropertyFox were on the market on average for 30 days before being sold.
"It is more difficult to push up prices in the current market.
"People are pretty cautious currently and eager for information on which to base their property decisions," explains Inglis.
Regarding investment properties, Inglis says a lot of speculators are realising their margins have become very tight, due to the price correction taking place. Many then choose rather to let their properties sit for the time being rather than putting them back on the market.
"One thing I could say to sellers and investors is that the market is not currently showing any real growth. It is very important for you to realise what you are going to spend on your home. You might not get returns, because what you spent it on might not add value for a new buyer," says Inglis.
"Understand your reason for spending the money on your home. If it is for you and your family to enjoy, then it is fine, but if you want to add value for selling, rather check with an expert first."
Seasonal trend
Allayed fears of water scarcity will undoubtedly reinforce the seasonal market rebound usually seen in the Cape Town residential property market in the early months of spring, according to Pam Golding Properties (PGP).
There’s also been much talk of late about the softening of house prices in the Cape metro, which until recently was the top performing area in the country. According to PGP, this should not be seen as cause for alarm.
"This price correction should be viewed positively for the market. After more than a decade of accelerated house price growth, especially in areas such as the Atlantic Seaboard where property prices increased by 650% in the past 15 years, what we are seeing now is a natural price adjustment," says Richard Day, Pam Golding Properties Group General Manager.
He says, seen in perspective, the Western Cape remains a desirable place to live and invest, and it is still the top performing regional market, with a 10.6% price increase from January to June 2018, according to the PGP Index.
The national average was only 4.25%.
The gap may be closing between house prices in the Cape metro and other cities, but the slowing of house price appreciation in some of the city’s property hot spots has also had the concomitant effect of boosting the market in others.
House prices in suburbs close to the City Bowl, such as Woodstock and Observatory, offering many of the same benefits as their more expensive counterparts, are showing signs of positive growth.